Essay: Systems engineering approach to transform IT services

Abstract

This project focuses on systems engineering approach taken by the IBS Company to transform their IT services resulting in a tremendously improved business model that consisted of independent yet interrelated autonomous business units. The rearrangement was carried out in 2001, by the top management of the group in order to create new capabilities by changing the company’s strategy and business model to focus on the services offered by Information Technology (IT) and consulting domain. This transformation was invariably achieved by regarding the application of various aspects of project management as a touchstone approach for successful development based on capability and an agile modus operandi. This transformation also led to form an extended business environment called as an extended enterprise.

The process of transformation is expounded as a kernel based model of Enterprise Systems and System of Systems (ES-SOS) that represents the hard nucleus as the primarily involved agents of business and the outer shell representing soft business including governance, knowledge, experience and competences and basically assets that are intangible. This also includes the above mentioned cluster of extended enterprise that are concerned with vendors, clients, contractors, other partners who are often affiliated with various business processes. Most part of the transformation process and their outcomes predominantly lie in the soft shell of the ES-SOS consisting of fomenting capabilities in terms of skills and competencies, business relations, governance and control.

Background

Founded in Russia, IBS has been till date a major IT solutions provider since 1992. It has gained a unique mark worldwide among the cluster of IT organizations especially with regard to the system of systems business model that constitutes of various autonomous business units. Some of the key business areas of IBS include Business Applications, IT Infrastructure and Data Management. IBS relies heavily on implementing Big Data technology.

In 2001, the senior management of the company decided to bring a transformation in the company’s strategy and business models. The company was already flourishing by being the top systems integrator in Russia and wanted to expand their business particularly in consulting and IT services. This decision was primarily based on external analysis of the economy and market trends for furthering the development. The company proactively prevised and reacted to the anticipated change in the business environment.

The sequence of premises that were considered for the prognosis is given below:

 Revamp the corporate processes, procedures and enterprise approaches based on development and growth in-order to implement sophisticated and internationally accepted standards as the corporate mantra.

 A need for business sophistication demanded increased competency to handle increased complexities in IT systems and of the entire organization. This required implementation and upgradation of new software systems such as Enterprise resource planning, Legacy system. Sophistication in the software would in turn push the development and enhancement of hardware.

 Increased complexity and sophistication of the business model in terms of organizational processes, hardware and software resources challenges expertise mainly in services such as IT, consulting management, business model implementation and application, skilled software, computer and network engineers.

During the transformation period, the organization’s business was set up as autonomous business units that are called as constituent systems. These Business Units (BUs) operate as a virtually independent firm or business. Some key with regard to BU functions are:

 According to management and accounting procedures, each BU requires Profit and Loss Analysis (PLA demographics).

 Each BU has established its own HR, Technology and Policy that are conducted independently.

 Back office functions were governed and executed (renting) by a centralized business unit office, which acted as an internal service provider for the BUs.

The capability of an organization is essentially the operational ability of the organization primarily pertaining to a collection of individuals, technologies and process that are utilized for a specific purpose. Enabling the enterprise business is developing the capability of the organization using the System Engineering methodologies on three levels such as business, team and personnel. The autonomous business units of the organization classify the group as a system of systems and the application of system engineering concepts to plan, design and improve the operation of the enterprise makes an outstanding testimony of the application of Enterprise Systems Engineering. Thus, the IBS organizational model makes it a remarkable example of an ES and SoS while keeping the models and approaches interrelated yet independent. The key area of study is the transformation to create new capabilities in the existing ES-SoS model.

Achieving the ES-SoS transition, required the following

 Re-analysis of the mission statement;

 Decomposition of Capabilities;

 Business Architecting, Process Modeling and Reengineering, Finance Modeling;

 Project Planning Process;

 Implementation and Service Improvement.

 Employing system engineering standards such as the DOD guide for SOS, ESE process guide, ISO 15288.

IBS ES-SoS: Enterprise System and System of Systems

The IBS Company being an ES/SoS operates in a multi-faceted environment that consists of Economic, Social, Political, Cultural, and Technology including nature as well. The below illustration depicts the characteristic behavior of the organization to these external generic factors which in turn manifests as a system of systems itself. Some specific factors like the internet boom, the 1998 debt factor and the dissolution of USSR had also been certain factors that changed the entire industrial and corporate game.

Fig 1: IBS Enterprise System Environment

The IBS structure consists of a central corporate governance media and the autonomous business units. Theses BUs are of three types namely:

 Sales Unit: Control and monitoring sales execution, support and analysis. CRM development.

 Technology: Execution of projects and engineering services.

 Back Office: Governance in the areas of finance, human resources, personnel training, administrative and logistics assistance.

Each of this BUs operates independently as separate business functions. The combination of Employees, project teams and business units constitute IBS as a whole.

Fig 2: Key agents of the IBS Organization

Fig 3: IBS – Extended Enterprise

The relationship between the autonomous business units exists in the form of administrative management, operations management, service and support provisioning. The BUs aren’t directly related with each other but correlation exists in the form of HR pool, technology and project provisioning teams.

Thus, the IBS ES-SoS can be classified as a vaguely linked deficit in hierarchies. Initially being a directive SoS, once the transformation was complete, the enterprise took to the form of being a collaborative system of systems. The non-hierarchical and gentle relationships aid in stimulating the autonomism of the business units and provide ease of adaptability. Consequently, this also impedes centralized and directive control thus challenging the style of governance after the completion of transformation.

One such solution to meet the governance requirement and improve the continued service was to employ a feedback system from the business units to the CGC. This was demonstrated by employing the annual process of planning and budgeting, strategizing guidelines for management and negotiation between the CGC and BUs. Various project executions consisted of employees coming together from different BUs which convoluted the relationship and the ES-SoS. It was essential to set boundaries for the firm with respect to the key business agents.

 The BUs, employees (including part time) and projects are considered in the ES- SoS. Fixed boundaries.

 Partners such as employees of consulting companies, vendors, contractors form an extended enterprise that help council processes and procedures as a separate BUs. Joint project teams are formed with integrated project management and accounting processes. The lifetime of these teams are temporary depending on the lifetime of project. Therefore the boundary is temporal and variable. The extended ES-SoS formed after the transformation.

Fig 4: IBS ES-SoS

Scope

The scope of the project was to implement it for the entire ES-SoS. The Scope estimates are calculated in the table below keeping regard of the following assumptions:

 Employees and extended companies are involved in the forms of joint teams to consult projects. Vital role of HR pool.

 Average projects at any time can range in 20 – 30. Normally, conducted by 2 or 3 employees (max of 15) can participate from the customer side. So approximately (20-30)*4 which give (80-120) personnel and (20-30) business constituent units are added (by customers).

 Contractors, Vendors and Partners are rarely involved (approx. in 20% teams). Partner’s side employees constitute of 30%, in project teams about 6% (ie. Around 66% of TU) and around (4-6) in constituent units.

Fig 5: Scope Estimation

Significant headcount difference of 20% between the extended enterprise and IBS, mean supplement virtual units is huge (No. of TUs more than twice the BUs).

Constraints

IBS dealt with major constraints during the transformation period. It was imperative to not hamper the current business and avert external expenses. The constraints are:

 Deficit experience and competencies to scale for large transformation.

 Lack of learning curve for management to run consulting services.

 Limited availability of professional consultants in labor market to provide guidance for new model approaches.

 Restrictions on resources and time.

Challenges

The main challenges were to tackle the constraints by the application of ESE-SE principles primarily with the lack of expertise and caps on funding and resources.

 The task was atypical; there were no fixed schemes or algorithms to tackle it. With the limited availability of experienced consultants, only generic personnel could be hired specializing in strategic and organizational management. The pros and cons of hiring external consultants were analysed. The final decision was to continue transformation without hiring external consultants. Separate Business Unit was developed to develop schemes for agile-style methodology and risk management.

Fig 6: Pros and Cons of External Consultants

 Management recognized IBS as a convoluted enterprise system consisting of BUs and agents making it a SoS. This complicated the understanding of the relationship between the business elements.

 An additional stress factor for the management taking the risk to implement transformation on the basis of misguided predictions and IT economy.

Development

The application of SE on IBS was to develop new mission and capabilities. The process of transformation can be represented using a V model.

1. Concept Development

Needs Analysis and Capabilities Decomposition

The initial analysis was to understand the correlation between the business units and strategize transition of mission into capabilities. The capabilities transition couldn’t be directly linked only to the business units (work as resource pools), nor the temporal projects or the personnel lacking necessary skills and competences, but it would require a holistic realization for successful transition.

Fig 7: SE Transformation Process – V model

1. Operational and Cost Benefit Analysis: At that point, the company was essentialy playing a vital role in the system integration area concerned with Russia IT having around 950 employees and generating $80 million worth of annual revenue. The factors that can be accounted for the growth of Russian economy at that time are as follows.

 The economy was hit hard by the 1998 financial crisis, followed by the default debt that caused a sizeable decline in economy and devaluation of the national currency. This increased a necessity to drive the economic growth primarily in the sectors of oil and gas, natural resources respectively.

 The country’s top leading corporations expanded their businesses overseas to international markets that demanded increased efficiency and internationally accepted approaches in terms of finance management and governance.

On the basis of the aforementioned predictions, the management decided to strategically shift their focus on IT and consulting services by increasing their shareholdings from 25% to above 50% in about a years’ time. A long term analysis is conducted to ensure further growth of this area of business.

Fig 8: Y2001-2010: IT Consulting Market of Russia ($ in billions)

1. Functional Analysis: To strategically transform the mission and capabilities of the organization by:

 Creating new consulting and technological services. New business models were established to plan and develop the services.

 Defining new sales capabilities to as to sell complex projects. 14

 Employ sophisticated and standardized approach for implementing multidisciplinary convoluted projects by defining guidelines.

 Effective management and training of human resources as they play the key role in consulting services.

 Measurement and control of project flows. Create target models, performance indicators as yardstick for individuals, projects and business constituents itself.

Fig 9: Detailed Mission and Strategy

2. Feasibility Analysis: The IT and consulting business are regarded to be more on the borderline in comparison with the box moving sphere. This involved technological complication and required strict firm alignment in terms of organizational structure, competence and skills. New learning curves on were defined on selling, execution of significant multidisciplinary projects based on consulting services, whereby treating sales and execution processes strictly as regular, routine and standardized procedures. Essentially it is quite evident that the required changes were to be performed in a fundamental manner rather than in an evolutionary style. Thus, during 2002, the dramatic business transformation of the IBS Group had formally begun to be executed.

Concept Definition – Key Areas

The transformation management team defined various business activities and operations as key areas for realizing the new capabilities. System of Tools, techniques, processes and technology were developed and implemented to support the transformation, which gave rise to a new corporate model for business architecture. The key operations are defined as five areas:

 Consulting and Service – Core Technology

 Project Execution and Implementation – Sell Complex group and Execute and Deliver group.

 BU growth – integration and hiring of personnel

 Employee motivation

 Accounting and management

Concept Exploration

A set of architectural documents were that represented the links between key areas describing the approaches, processes, system and policies utilized by them, by bringing together multiple views of the company to generate a transformation operation model by projecting the mission and necessary capabilities to different business elements of the firm.

Fig 10: Description of IBS Business Architecture

2. Engineering Development

The new capabilities support systems were developed for every key area. This involved:

 Development of processes, techniques, documents.

 Implementation of software systems for support.

 End to End development of Rules and processes

 Cross integration of policies and processes between employees, project teams and BUs.

 Multiple V models employed for parallel system development representing the holistic transformation.

Fig 11: Multiple V Model Representing Transformation

Advanced Development

Fig 12: Development of Systems to Support New Capabilities

Engineering Design- IBS SEA Profile

An in depth understanding of the SoS was created by analysing the system engineering profile based on four contexts.

 Strategy Based: With the corportate mission defined right at the firm’s establishment, it became imperative to analyse the risk of extending boundaries without experiencing mission liquidity.

 Implementation Based: Significant and integrated efforts from various key agents required.

 Stakeholder Based: Corportate owners, leaders, managing partners involvement was of vital importance.

 System Based: Development of new capabilities and their impacts were to be predicted. Some non-engineering aspects posed challege in forecasting.

Fig 13: Contexts of the IBS System Engineering Profile

The following are the key points from the System Engineering Analysis:

 System Problem Definition: definition of the future need and required capabilities.

 Alternatives Analysis: Since the transformation required changes in capabilities and competences it became imperative to consider social and psychological factors.

 Architectural Guidance: Set of views. Developing and enhancing perception.

 Technical approaches: Research and establishment of processes to conduct projects specifically pertaining to the firm’s needs.

 Approaching Solution: From various options, a single solution is taken as consensus. Multiple options couldn’t be tested due to firm’s working restrictions.

 Contingency Management: Opportunities and risk analysis by establishing a rollback plan for risk management.

 Implementation: Changes were deployed in the realistic environment.

 Operational Capabilities: Integrating operations and horizontal communications between the prime business agents.

 Evaluation and Learning: Development of metrics as key indicators to track and monitor performance and increase efficiency such as financial revenue generated from projects and other feedback metrics.

Fig 14: SEA Profile of IBS

Integration and Evaluation – Pilot Implementation

The support system for the new capabilities was initially implemented in the pilot zones in-order to save the testing and re-implementation time if any changes need be. The team mostly piloted only the crucial and critical sections and not the entire system or procedure assuming that well-known fragments of the business wouldn’t create real problems during production.

3. Post Development – Consists of rollout and continual improvement.

Production – Roll out for every key area

Once the capabilities support system was tested in the pilot environment, they were rolled out for the whole organization including extended enterprise. Initially all systems were developed as integrated systems belonging to all the areas eg.The time sheet motivation, project and accounting and management). The integration was considered as internal and a natural phenomenon for development of different processes that was executed by different teams but within the same organization. It became essential to define engineering indicators and measures for each stage. These were implemented to measure and monitor the performance of all the business elements.

Operation and Performance Assessment

The idea of continual improvement was bolstered by conducting fragment testing at the pilot stages itself. The company’s performance was monitored by developing indicators to measure and improvise capabilities development and implementation. The improvements are executed regularly on a continuous basis to ensure high quality of service.

Result

The goal of the transformation to widely achieve creation of new capabilities was evident from the accomplishments of the results. The business focus shifted from box- moving to consulting. This dramatically shifted the business strategy and mission statements. The organization transformed to a purely service company. Shares were increased on different services and complex projects. The Sales executives gleaned the knowledge to sell the consulting services. Resource planning, management, project investment and management, measurement and estimation of forecasts, risk and mitigation plans were enforced on full swing. Auxiliary and supporting tools and software implemented for key business functions. There was increased involvement of clients, vendors and partners that led to the formation of the extended enterprise. The transformation brought about end to end, holistically integrated capabilities among the business constituents.

Fig 15: Result Accomplished from IBS Business Transformation

Analysis

From the IBS nuclear model of the ES-SOS, the transformation was essentially change the intangible areas, affecting the soft shell and creating the cloud clients, partners and vendors. The logical sequence of transition employed was from:

Mission->Capabilities->Architecting into Key Areas -> Integrated Process- >Development of New Capabilities like tools and software.

Fig 16: Nuclear Model of IBS ES-SoS

The entire transformation was executed between 2001 and 2002. Description of tasks and process in a agility-based manner quickened the decision making and implementation processes. About a month went for analysing the needs and concept definition, which was followed by parallel execution of the remaining activities.

Lessons Learned

Due to the lack of availability of competencies and uncertainty of the market forecast, the management faced some hurdles that had to be overcome. Also, the approach focussed on affecting the more fluid, intangible aspects of the soft business. These were invariably dealt with certain best practices that can be inferred from the case study.

1. Agile-Style Management: Majorly and effectively combated in dealing with ambiguity and fuzzy changes. This approach extensively involved active participation, partnerships and sponsorships, open and cross information exchange, multidisciplinary project teams, proactive responses by collaborations and constituents, Design, development and prioritization of ambiguous functions, piloting in production environment, Judicial control and management of projects, resources and time.

2. Capability – Development and Architecting: This approach remarkably transforms the mission to the required capabilities by integrating with system engineering approaches to the vital areas of the business.

3. Definition of key areas and developing auxiliary capability support systems: The definition of the five different areas the supporting software and resourceful systems are appropriate for developing and implementing any enterprise system in general. These widely support decision making for planning, monitoring, estimation, pricing strategy and motivation.

4. Lack of Corporate Knowledge Base: No formal search engine or hard approach was present to ensure exchange of skills and competencies.

Summary

In the business transformation of IBS group, new capabilities were developed; also an extended enterprise consisting of clients, partners and vendors was formed as a spin off company of IBS. Right from the top levels of management, stakeholders, and employees, all were active participants and contributors in this process of change. The activities executed in a system engineering fashion were:

 Needs Analysis of the system capabilities,

 Concept definition of the key areas,

 Concept development and architecting new capability support systems,

 Pilot implementation in safe zone for each vital area and roll out for extended enterprise,

 Operation and performance assessment.

Agility management, capability-based development and architecting were prime methodologies utilized in order to achieve the transformation. The main activities of the transformation lie in the core area of soft business. Since the inception of the idea to transform from forecasting the Russian economy market, IBS has dramatically grown to be in the top finest consulting service, owning a large market share between the years of 2002 and 2012. The techniques and practices employed during the transformation proved to be effective and efficient and thus are continued to be practiced for various business operations, acquisitions and company mergers.

References

1. IBS Group Case Study – Mikhail Belov – Case Studies in System of Systems, Enterprise Systems, and Complex Systems Engineering by Alex Gorod, Brian E. White, Vernon Ireland, S. Jimmy Gandhi, Brian Sauser
2. https://books.google.com/books?id=zB3cBQAAQBAJ&pg=PA132&lpg=PA132&dq =IBS+Company+Systems+engineering&source=bl&ots=4mIAkz_IX8&sig=35z1v D3xdXS_GwWaqoN- W5zmKTk&hl=en&sa=X&ved=0ahUKEwj2iuOFgpPSAhVR92MKHenTBPMQ6 AEIPTAG#v=onepage&q&f=fals
3. http://sebokwiki.org/wiki/Enabling_Businesses_and_Enterprises
4. http://sebokwiki.org/wiki/Enterprise_Systems_Engineering
5. https://en.wikipedia.org/wiki/Shared_services
6. http://www.acq.osd.mil/se/docs/SE-Guide-for-SoS.pdf

2017-12-2-1512220872